House passes oil tax overhaul

Richard Mauer

This story has been updated. Fine the new version here.

JUNEAU -- The House passed its version of Gov. Sean Parnell's oil-tax cuts in the early hours of the final day of the Legislature Sunday, sending the historic revamp of Alaska's most important tax back to the Senate for a concurrence vote.

The vote came at 1:58 a.m. after three hours of debate in which 22 of the 39 representatives present spoke. The initial tally was 24-15. In a reconsideration vote nine minutes later, three Republicans shifted sides, making the final result 27-12.

If both Senate and House agree on a final bill, Alaska's three big oil producers, ConocoPhillips, BP and ExxonMobil, will find themselves saving billions of dollars over the next five years. With 90 percent of Alaska's revenues coming from oil, the state treasury will be that much poorer.

The bill would wipe out the current tax scheme in place since Gov. Sarah Palin pushed it in 2007 as Alaska's Clear and Equitable Share, replacing it with a structure whose only name so far is Senate Bill 21. While both measures contain many combinations of taxes and credits, the key feature of ACES came to be its progressive tax that increases Alaska's cut of state-owned oil as the price rises. The key feature of Senate Bill 21 is that it has almost no progressive tax.

Supporters of the tax cuts said they expect industry to respond by investing billions more in the state to stem the decline in production from the big North Slope fields. Opponents said the measure was nothing more than a giveaway to the state's most powerful businesses with no guarantee that their new profits would be spent pumping more oil into the trans-Alaska pipeline.

On March 20, the Senate sent a somewhat different version of the bill to the House on a whisker-close 11-9 vote. The Senate will probably vote Sunday afternoon on the copy sent back by the House.

For both chambers to meet the 90-day statutory session limit, they'll have to adjourn by midnight Sunday. In addition to oil taxes, final passage awaits for the operating and capital budgets along with two big measures that have been faltering in the final days: one to advance the Knik Arm bridge and the other to change the way the state manages water rights and development on its land.

House Speaker Mike Chenault, a strong support of the oil-tax cuts, gaveled the House into session to being hearing Senate Bill 21 about 4:30 p.m. Saturday. Over the next 5 1/2 hours, House members proposed 13 amendments to the bill.

Most were by Democrats trying to restore portions of ACES or requiring that oil companies actually increase production to keep their tax breaks. All those failed by substantial margins.

Aside for one amendment that fixed a part of the bill and passed by unanimous consent, the closest vote was on a proposal by Rep. Paul Seaton, R-Homer.

Seaton suggested that oil companies be required to prove themselves worthy of credits by showing their production in 2019 exceeded that of 2012.

"We will get increased production or this credit we're offering will go away," Seaton said. "You told us you were going to produce. If you don't we'll remove from some of the credits for you."

Rep. Mia Costello, R-Anchorage, opposed Seaton. She said the amendment would "make us less competitive."

Rep. Dan Saddler, R-Eagle River, said it would "chill investment."

Rep. Alan Austerman, R-Kodiak, said it would give the oil companies an incentive to produce.

The amendment failed, 16-22.

Rep. Eric Feige, R-Chickaloon, opened final debate on the full bill just after 11 p.m. Feige, co-chairman of the House Resources Committee, which held hours of hearings on the bill, noted that Alaska has changed oil taxes four times before.

"Every time we've changed taxes, we have raised them," Feige said. But in 2007, with ACES, "we raised them a little too far."

"It's time to make a little history and let the world know Alaska is open for business, and lower those tax rates," Feige said.

If it turns out that oil companies just take the money and run, Feige said, nothing prevents the Legislature from taking another look.

"If we see no efforts to bring forth new oil, new production, to TAPS (trans-Alaska pipeline system), we will have to go back and reexamine this fiscal policy change. My expectation is that this (next) change will not be a pretty one for the oil companies. I'm sure the companies are listening," he said.

Rep. Les Gara, D-Anchorage, a leading opponent of the measure, said the tax rollback will lead the oil companies to spend their windfalls elsewhere -- because nothing the law requires them to spend it here. Gara said the tax cuts will be worse than the Parnell administration has claimed because it's basing its projections on lower than expected oil prices and production. It's more likely the state would lose $1.5 billion a year, based on $120 a barrel oil, Gara said.

Gara said the governor's office has blocked two independent experts from sharing their advice with the Legislature by placing them under contract and forbidding them to testify. They likely would have said that ACES is basically sound, he said.

"The public has been done a disservice by being deprived of information from consultants who might disagree with the governor," Gara said.

Tax cut supporter Rep. Dan Saddler, R-Eagle River, said the tax credits in ACES "encourages just spending" by producers, not necessarily investments in new production.

Rep. Tammie Wilson, R-North Pole, said she found it embarrassing that opponents of the bill were "putting down" the oil companies.

"These are our business partners," she said. "We should be thrilled they are here."

Rep. Jonathan Kreiss-Tomkins, D-Sitka, said that was the wrong way to look at the relationship between the state and industry. Some proponents of the tax cut were emotional about the industry and talked in terms of trust -- just like the tax bill does, he said.

"This bill is built around the logic of trust," Kreiss-Tomkins said. Instead, he said, it should be about a business relationship using guarantees and that honors the state constitution's requirement that Alaska get the "maximum benefit" for its resources.


How they voted:


Republicans voting for passage: Chenault (Nikiski), Costello (Anchorage), Feige (Chickaloon), Gattis (Wasilla), Hawker (Anchorage), Higgins (Fairbanks), Holmes (Anchorage), Hughes (Palmer), Isaacson (Fairbanks), Johnson (Anchorage), Keller (Wasilla), LeDoux (Anchorage), Lynn (Anchorage), Millett (Anchorage), Neuman (Big Lake), Olson (Soldotna), Pruitt (Anchorage), Reinbold (Eagle River), Saddler (Eagle River), Stoltze (Chugiak), Thompson (Fairbanks), Peggy Wilson (Wrangell), Tammie Wilson (North Pole).

Democrat voting for passage: Nageak (Barrow).

Republicans voting against passage: Austerman (Kodiak), Munoz (Juneau), Seaton (Homer).

Democrats voting against passage: Drummond (Anchorage), Edgmon (Dillingham), Foster (Nome), Gara (Anchorage), Gruenberg (Anchorage), Herron (Bethel), Josephson (Anchorage), Kawasaki (Fairbanks), Kerttula (Juneau), Kreiss-Tomkins (Sitka), Tarr (Anchorage), Tuck (Anchorage).

Excused Absence: Guttenberg (D-Fairbanks).

Note: in the reconsideration vote, Austerman, Munoz and Seaton voted for passage.



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